UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): | November 9, 2017 | |
LAWSON PRODUCTS, INC. |
(Exact name of registrant as specified in its charter) |
Delaware | 0-10546 | 36-2229304 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
8770 W. Bryn Mawr Ave., Suite 900, Chicago, Illinois | 60631 | |
(Address of principal executive offices) | (Zip Code) | |
(Registrant's telephone number, including area code) | (773) 304-5050 | |
Not Applicable |
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01 Regulation FD Disclosure.
Lawson Products, Inc. (the "Company") has updated its Investor Presentation (the “Presentation”) which is furnished as Exhibit 99.1 to this Report on Form 8-K. A copy of the Presentation is also available on the Company’s website at www.lawsonproducts.com.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
99.1 Investor Presentation Third Quarter 2017
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
LAWSON PRODUCTS, INC. | ||
(Registrant) | ||
Date: November 9, 2017 | By: /s/ Ronald J. Knutson | |
Name: Ronald J. Knutson | ||
Title: Executive Vice President, Chief Financial Officer, Treasurer and Controller | ||
EXHIBIT INDEX
Exhibit Number | Description | |
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Investor Presentation
Third Quarter 2017
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Lawson Products, Inc.
"Safe Harbor" Statement under the Securities Litigation Reform Act of 1995:
This presentation contains certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties. The terms “may,” “should,” “could,”
“anticipate,” “believe,” “continues,” “estimate,” “expect,” “intend,” “objective,” “plan,” “potential,” “project”
and similar expressions are intended to identify forward-looking statements. These statements are not
guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.
These statements are based on management’s current expectations, intentions or beliefs and are subject to a
number of factors, assumptions and uncertainties that could cause actual results to differ materially from
those described in the forward-looking statements. Factors that could cause or contribute to such differences
or that might otherwise impact the business include: failure to retain a talented workforce including productive
sales representatives; the inability of management to successfully implement strategic initiatives; failure to
manage change; the ability to adequately fund our operating and working capital needs through cash
generated from operations; the ability to meet the covenant requirements of our line of credit; disruptions of
the Company’s information and communication systems; the effect of general economic and market
conditions; inventory obsolescence; work stoppages and other disruptions at transportation centers or
shipping ports; changing customer demand and product mixes; increases in commodity prices; violations of
environmental protection regulations; a negative outcome related to tax matters; and, all other factors
discussed in the Company’s “Risk Factors” set forth in its Annual Report on Form 10-K for the year ended
December 31, 2016.
The Company undertakes no obligation to update any such factors or to publicly announce the results of any
revisions to any forward-looking statements contained herein whether as a result of new information, future
events or otherwise.
2
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Lawson Products: At a Glance
Fasteners Cutting Tools Chemicals Hydraulics Other
• Leading service based provider of consumables in MRO market
• Serves industrial, commercial, institutional and government markets in
all 50 states, Canada, Mexico, Puerto Rico and the Caribbean
• Headquartered in Chicago, IL
– Strategically located distribution centers
– Workforce ~1,600 (~ 1,000 sales reps)
• Supplies a comprehensive line of products to the MRO marketplace
• VMI and private label drives high gross margins
3
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Competitive Advantages and Differentiators
What differentiates Lawson:
• Service intensive “high touch”
value proposition
• Vendor managed inventory or
“keep fill”
• Deep product knowledge
• Broad geographic sales and
service coverage throughout
the US and Canada
• Leverage investments in sales
team, facilities and technology
to enable outstanding
customer service
• Lowest total cost
“Not the Typical MRO Distributor”
4
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Our Commitment to our 70,000 Customers
High touch service and technical expertise drives customer relationships
One Company, Zero Headaches Inventory Management Options Access to Industry Knowledge &
Expertise
• Comprehensive line of products • Lawson Managed Inventory • Product recommendations from
your Lawson Representative
• Hundreds of pre-built assortments • Industrial vending • Application advice from our test
and application engineers
• Unlimited sourcing of hard-to-find
items
• Self-service inventory
management
• Complimentary on-site safety &
product usage training
Before After
5
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Customer and Product Profile
(1) Other consists primarily of freight revenue offset by rebates
6
Fastening Systems
21%
Fluid Power
16%
Specialty
Chemicals
14%
Cutting Tools and
Abrasives
14%
Electrical
12%
Aftermarket
Automotive
Supplies
9%
Safety
4%
Welding and Metal
Repair
2% Other
8%
Product Mix
Regional Accounts
55%
Strategic
14%
Kent Automotive
18%
Government
10%
Other (1)
3%
Customer Mix
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Lawson Growth Strategy
Sales Growth Driven By
Foundational Support
ERP
Network
Optimization
Sales
Transformation
Lean Six
Sigma
Website
Add New
Sales
Reps
Drive Sales
Rep
Productivity
Acquisitions
7
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
2017 Focus: Actions Across the Value Chain Driving Growth
Information Technology – Integration of Web and SAP
Lean Six Sigma
Add New Sales Reps and Drive Rep Productivity
Sales Process /
Sales Reps
Customer
Service / Order
Entry
Product
Management /
Pricing
DC Operations
Sourcing /
Purchasing
• Increase sales rep
count
• Onboarding
process/training
• Sales
Management
dashboard
• EDI with
customers
• Reduction of
cycle times
• Order pad
• Consolidation of
shipments
• Sales service reps
• Leverage vendor
drop-ship
programs
• Fleet maintenance
focus
• Pricing
enhancements
• Website
• Reduce cycle time
• Refine “Pull”
strategy
• Freight
enhancements
• Minimize
backorders
• Improve service
levels
• Forecasting tool
• Supplier
negotiation
process
• Vendor metrics
• Electronic
communication
8
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Longer Sales Rep Tenure Drives Rep Productivity
9
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
0
50
100
150
200
250
300
350
400
< 12 Mos. 1 - 2 Yrs. 3 - 5 Yrs. 5 - 10 Yrs. > 10 Yrs.
A
ve
ra
ge
A
n
n
u
al
Sal
e
s
in
T
h
o
u
sa
n
d
s
N
u
m
b
er
o
f
Sal
e
s
R
ep
s
Tenure with Lawson (as of 9/30/17)
Number of Reps Average Annual Sales
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Historical Financial Performance
10
$200,000
$250,000
$300,000
$350,000
2012 2013 2014 2015 2016 TTM
2017
TTM
2017
with
Bolt
MRO Revenues
-$20,000
-$10,000
$0
$10,000
$20,000
$30,000
2012 2013 2014 2015 2016 Q3 2017
Net Cash/(Debt)
700
750
800
850
900
950
1,000
1,050
2012 2013 2014 2015 2016 Q3 2017
Rep Count
Adjusted EBITDA excludes impact from severance, stock-based
compensation, real estate gains/losses, asset impairments and national
sales meeting.
-$5,000
$0
$5,000
$10,000
$15,000
$20,000
2012 2013 2014 2015 2016 TTM
2017
TTM
2017
P/F
With
Bolt
Adjusted EBITDA
Recent sales growth and earnings expansion providing financial flexibility
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Financial Highlights for Third Quarter 2017
• Average daily sales increased 9.5% YOY
• Strong gross margins – Consistently over 60%
• Adjusted EBITDA margin improving
6.8% in Q3 2017 v. 5.8% in Q3 2016 and 6.0% in Q2 2017
Continued investment in new sales reps
Cost control measures in place
• Continued expansion through acquisitions
Acquired Bolt Supply House in October 2017
Completed three acquisitions in 2016
• Strong balance sheet
Available cash of $19 million at the end of Q3
Significant capital investments completed to support growth
$40 million credit facility in place
11
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Lawson Products: Poised for Growth
• Foundational Investments Completed
• Operational Excellence
• Leverage Current Infrastructure
• Continued Sales Force Expansion
• Large Fragmented Market
12
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
For More Information
Contact:
Ronald J. Knutson
EVP, CFO
Investor Relations
(773) 304-5665
ron.knutson@lawsonproducts.com
And see our Website at
http://www.lawsonproducts.com/company-info/investor-relations.jsp
13
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Appendices
14
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Significant Activities
Appendix P-1
15
August 2011 Implemented SAP
October 2011 Commenced construction of new McCook, Ill distribution center
May 2012 Relocated corporate headquarters
June 2012 Restructured senior team. Announced $20M cost savings plan
Transitioned packaging facility to McCook, Ill distribution center
Entered into new five-year $40M credit facility
Announced new CEO and President, Michael G. DeCata
Consolidated Vernon Hills distribution center into McCook, Ill
November 2012 Rolled out new website to existing web customers
December 2012 Completed transition of U.S. independent agents to employees
April 2013 Roll-out of new website to new web customers
April/May 2013 McCook DC begins to ship customer orders
November 2013 Entered into sub-lease of headquarters space to generate $2.9M of future cash savings
December 2013 Ended year with over 800 sales reps – First increase in 8 years
February 2014 Closed on Automatic Screw Machine Products sale for net proceeds of $12.1M
June 2014 Entered into sale-leaseback of Reno distribution facility for net proceeds of $8.3M
December 2014 Ended year with over 900 sales reps
February 2015 Held North American sales meeting
September 2015 Completed West Coast Fasteners acquisition
March 2016 Completed Perfect Products of Michigan acquisition
May 2016 Completed F. B. Feeney acquisition
June 2016 Expanded sales team to over 1,000 sales reps
September 2016 Extended credit facitlity to August, 2020
November 2016 Completed Mattic Industries acquisition
March 2017 Consolidated Fairfield, NJ distribution operations into McCook, Ill and Suwanee, GA
May 2017 Sold Fairfield, NJ distribution center for a gain of $5.4M
October 2017 Completed Bolt Supply House acquisition
August 2012
October 2012
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Regulation G – GAAP Reconciliation
Appendix P-2
Non GAAP Reconciliation of Adjusted EBITDA to Sales Percentage
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company's management believes
that certain non-GAAP financial measures may provide users of this financial information additional meaningful comparisons between current results and results in
prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the
business because they provide a comparison of historical information that excludes certain non-operational, non-recurring or intermittently recurring items that
impact the overall comparability. See the table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for quarterly
adjusted EBITDA as a percentage of net sales. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported
results prepared in accordance with GAAP.
16
($ in thousands) Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Net Sales $ 70,243 $ 64,961 $ 69,711 $ 69,348 $ 70,199 $ 67,315 $ 74,617 $ 75,006 $ 75,651
Operating Income (Loss) 2,810 (2,985) 1,169 29 2,389 (5,044) 712 7,891 1,090
Depreciation & Amortization 2,119 2,202 2,187 2,226 1,973 1,680 1,705 1,644 1,591
EBITDA 4,929 (783) 3,356 2,255 4,362 (3,364) 2,417 9,535 2,681
Excluded Costs
Severance 372 280 204 143 367 1,662 465 (9) 139
Stock Based Compensation (Benefit) (30) 1,693 (1,217) 515 (630) 3,801 (30) 415 2,337
Loss/(Gain) on Disposal of Property (2) 9 - - - - (5,422) -
Remediation expense - 931 - - - - - - -
Adjusted EBITDA $ 5,269 $ 2,130 $ 2,343 $ 2,913 $ 4,099 $ 2,099 $ 2,852 $ 4,519 $ 5,157
Adjusted EBITDA % of Sales 7.5% 3.3% 3.4% 4.2% 5.8% 3.1% 3.8% 6.0% 6.8%
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Quarterly Results Appendix P-3
17
Three Months Ended
Sep. 30
2017
Jun. 30
2017
Mar. 31
2017
Dec. 31
2016
Sep. 30
2016
Number of business days 63
64
64
60
64
Average daily net sales $ 1,201
$ 1,172
$ 1,166
$ 1,122
$ 1,097
Sequential quarter increase 2.5 % 0.5 % 3.9 % 2.3 % 1.2 %
Average active sales rep. count 991
981
990
1,007
1,007
Period-end active sales rep. count 988
987
979
1,009
1,006
Sales per rep. per day $ 1.212
$ 1.195
$ 1.178
$ 1.114
$ 1.089
Sequential quarter increase (decrease) 1.4 % 1.4 % 5.7 % 2.3 % (1.4 )%
Net sales $ 75,651
$ 75,006
$ 74,617
$ 67,315
$ 70,199
Gross profit 46,005
45,141
44,879
40,504
42,573
Gross profit percentage 60.8 % 60.2 % 60.1 % 60.2 % 60.6 %
Selling, general & administrative expenses $ 44,915
$ 42,672
$ 44,167
$ 45,548
$ 40,184
Gain on sale of property —
(5,422 ) —
—
—
44,915
37,250
44,167
45,548
40,184
Operating income (loss) $ 1,090
$ 7,891
$ 712
$ (5,044 ) $ 2,389
© 2015 Lawson Products, Inc. • Confidential Material, Reproduction, In Whole or in Part, Prohibited.
Appendix P-4
Consolidated Balance Sheet
18
September 30, December 31,
2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 19,043 $ 10,421
Restricted cash 800 800
Accounts receivable, less allowance for doubtful accounts 37,290 30,200
Inventories, net 43,341 42,561
Miscellaneous receivables and prepaid expenses 3,755 3,788
Total current assets 104,229 87,770
Property, plant and equipment, net 26,844 30,907
Cash value of life insurance 11,623 10,051
Goodwill 5,789 5,520
Deferred income taxes 20 20
Other assets 905 1,039
Total assets $ 149,410 $ 135,307
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving line of credit $ — $ 841
Accounts payable 12,207 11,307
Accrued expenses and other liabilities 30,831 27,289
Total current liabilities 43,038 39,437
Security bonus plan 13,347 14,216
Financing lease obligation 6,710 7,543
Deferred compensation 5,108 4,830
Deferred rent liability 3,473 3,676
Other liabilities 5,071 4,472
Total liabilities 76,747 74,174
Stockholders’ equity:
Preferred stock, $1 par value:
Authorized - 500,000 shares, issued and outstanding — None — —
Common stock, $1 par value:
Authorized - 35,000,000 shares
Issued - 8,921,302 and 8,864,929 shares, respectively
Outstanding - 8,888,028 and 8,832,623 shares, respectively
8,921
8,865
Capital in excess of par value 12,335 11,055
Retained earnings 51,216 41,943
Treasury stock – 33,274 and 32,306 shares, respectively (711 ) (691 )
Accumulated other comprehensive income (loss) 902 (39 )
Total stockholders’ equity 72,663 61,133
Total liabilities and stockholders’ equity $ 149,410 $ 135,307